The issue of tax affecting is as confusing as ever, as a recent bankruptcy decision illustrates. Embedded in the court’s adjudication of over 20 claims of fraudulent transfers is a discussion over how to value stock in one of the defendants’ S corporations. And it shows that even experienced valuators struggle. Although the defendants’ expert was able to convince the court that an accurate valuation of the subject S corp had to consider the taxation of the shareholders on the company’s earnings, the court discredited the way he translated this principle into practice when calculating the company’s cash flow.

Now comes a new guide to valuing S corporations by two of the foremost scholars in the field that promises to answer some of the most vexing questions on the subject. In "Taxes and Value: The Ongoing Research and Analysis Relating to the S Corporation Valuation Puzzle," acclaimed authors Nancy Fannon and Keith Sellers dig deep into the academic research on the impact of taxes on firm value and explore how historical market returns impound the effects of shareholder taxes. While the authors are the first to admit that there are no easy answers to valuing pass-through entities, their work—which includes an analysis of the foundational case law on tax affecting—equips appraisers with the understanding of the applicable concepts necessary to generate informed valuation conclusions.